Tug of war over NBA rights offers glimpse of media future

Tug of war over NBA rights offers glimpse of media future

The National Basketball Association season ended Tuesday, with stars like LeBron James and Nikola Jokic beginning their long quest for a title. But the action that will have long-term impacts on the league and the media and entertainment landscape is taking place outside the court.

The companies that own the rights to show NBA games — Disney, which owns ESPN and ABC, and Warner Bros. Discovery, TNT’s parent company — are collectively paying the league $24 billion over nine years for that privilege. But their contracts expire after next season, and the NBA expects to more than double the amount of money it will receive for the rights in the next deal, according to multiple people familiar with the league’s expectations, who spoke on condition of anonymity. Discussed the conversation.

This will not be achieved without a fight. After decades in which sports leagues raked in vast sums of money for the rights to show their games, there are signs that media and technology companies are under increasing pressure to justify the exorbitant amounts spent on broadcast rights. Interest rates are high, Wall Street is seeking profitability over growth, and streaming has reconfigured the entertainment industry.

The outcome of the NBA talks will say a lot about the future of broadcast networks, cable bundles, streaming services and the sports media ambitions of technology companies.

“I think this is the last of the big deals in the era we’re coming out of,” said John Cosner, who advised sports media and tech start-ups after a two-decade career as an executive at ESPN. “

The National Football League, the world’s most valuable sports league, did not double its rights fees when it signed new deals in 2021. And this was before the stock market crashed, interest rates rose, and wars broke out in Europe and the Middle East. ,

Disney and Warner Bros. Discovery, which have televised NBA games for more than two decades, aren’t necessarily in a position to spend a lot of cash.

Disney has undertaken extreme cost cutting and layoffs this year, and its chief executive, Robert A. Iger has said the company is considering “strategic alternatives” to selling equity in ESPN. Warner Bros. Discovery has also cut costs, and said in August that it had about $50 billion in debt after the two companies merged last year.

According to people familiar with the negotiations, the most likely scenario is that Disney and Warner Bros. Discovery will sign a new deal with the NBA to televise fewer games. The NBA declined to comment for this article.

The two companies together show approximately 160 regular season games each year, as well as the playoffs and the NBA Finals. Most games are shown on cable (ESPN and TNT), with some shown on ABC.

For both companies, NBA broadcast rights still represent a valuable bargaining chip in negotiations with their biggest customers: cable and satellite companies. Those distributors pay Disney and Warner Bros. Discovery billions of dollars for the rights to show their cable channels, including TNT and ESPN, based on the expectation that those channels will air sports such as NBA basketball.

The NBA package will also help both companies move into a streaming future. warner bros discovery recent A live sports package was added for its streaming service Max, while ESPN has been vocal about a stand-alone streaming offering for its flagship channel in the near future.

However, Disney and Warner Bros. Discovery are unlikely to be the only companies showing NBA games. If those companies show fewer games in the new deal, the league could create a third rights package, perhaps even a quarter, of games no longer included in the first two packages, as well as the league’s new in-season tournament.

The most likely buyers of those game packages are Amazon and NBC, according to people familiar with the negotiations.

top executive fox, cbs and owned by Google youtube have said that they are unlikely to make a serious bid for the broadcast rights. Netflix and Apple’s intentions are less clear, but Netflix has long said it has no interest in paying the kind of prices the NBA wants. Apple has committed itself to a sports strategy of purchasing all domestic and international rights to the league on a large scale Recent deal with Major League Soccer, It’s not possible with the NBA

Amazon and NBC are attractive partners for the NBA for very different reasons.

For a generation, most NBA games could only be viewed with a cable package. But the decline of the cable bundle – from about 100 million households with a cable package a decade ago to about 70 million today – has made old-school broadcast networks, the most widely distributed television channel, even more attractive. With CBS and Fox as unlikely bidders, the league wanted the games to be shown on NBC’s broadcast channel.

As far as Amazon is concerned, it’s seen as highly unlikely that the NBA — a league that prides itself on being forward-thinking about technology — will be interested only in traditional media, according to some people familiar with the talks. Will sign a new rights agreement with the companies. Amazon has long been interested in broadcasting the NBA, according to a person familiar with the league’s negotiating history, and has received praise for the way it has handled Thursday night NFL games.

Media and technology companies declined to comment for this article. cnbc, bloomberg And wall street journal All have previously reported on parts of the NBA’s media-rights negotiations.

The league has several other media assets it can take advantage of. Most NBA games are not televised nationally. Instead, they are broadcast in their local markets, with individual teams controlling the rights to sell those games. Teams have traditionally sold those rights to regional sports networks, but they are collapsing, causing teams to look for alternatives.

If Diamond Sports, which is in bankruptcy proceedings, collapses, the NBA could suddenly gain control of the local rights to nearly half the teams in the league. If that happens, it could sell some of those rights to a national partner. But that would require the league to work with its team owners as well as current rights holders — the complex task of navigating nearly 30 different local agreements.

It would also exclude several high-profile teams, such as the New York Knicks and Los Angeles Lakers, who have long-term local rights agreements with successful regional sports networks.

The NBA may also sell some international rights. The rights to show NBA games in some basketball-mad countries like China can be extremely valuable, especially as domestic streaming companies look for new markets. But the league – unique among American sports in that it sells all of its international rights directly rather than working with third parties – is seen as more likely to sell those rights to the highest bidder country-by-country. .

If the NBA wants to do something unprecedented, the real wild card may be its old stalwart: ESPN.

Disney and ESPN executives have spoken with private equity firms, tech and mobile companies and sports leagues in recent months, and concluded that if they were to give up equity, it would be as part of a long-term plan for a league. Or it should be for the league. term partnership, according to two people familiar with ESPN’s plans.

analysts have ESPN is valued at $25 billion to $50 billion, meaning a potential partner would have to trade billions worth of business even for a small stake. While a partner could pay Disney for a stake in ESPN, the company is really looking for exclusive content, some of the people involved in the negotiations said.

Disney executives have talked to several sports leagues, including the NBA, about selling equity in ESPN and what the company would want from such an arrangement. According to one of the people, benefits sought by ESPN in the partnership include more closely integrating the league’s social media operations with the network, content such as documentary rights and more in-game audio from players, to be distributed during those games. Those who don’t have broadcast rights can work together on the rights and marketing of their apps.

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